**Milling Machine Cost Analysis**A milling machine equipped with enhanced CNC controls for high-speed machining of free-form parts was purchased two years ago for $195,000. The company is considering upgrading to a recently available, faster model with the capability of controlling up to 8 axes, priced at $240,000. The current machine can be sold in today's market for $105,000. Over the past two years, its operating cost has been $30,000 annually. Determine the value that should be used as P for the currently owned machine.**Options:**- a. $105,000- b. $240,000- c. $30,000- d. $195,000The correct choice is **a. $105,000**.

One of the fundamental analyses in capital budgeting is replacement analysis. Physical deterioration, changes in economic conditions, and quick technological advances all have the potential to shorten an asset's life span and make it outdated sooner than anticipated. There are two main justifications for thinking about replacing equipment: physical damage to the individual parts or obsolescence of the equipment. The replacement of assets presents an economic opportunity for the company. Physical impairment only relates to alterations Initial cost, initial projected salvage value, annual operating and maintenance costs, and remaining life are all unimportant for replacement consideration. The machine that is now possessed cost $195000 at purchase. A more contemporary speedier model costs $240,000. The price of the currently owned machine is $105,000. Its OC is $60000 for two years, or $30000 per year. The amount of $195000 should be used as P for the machine that is currently owned ( if P being the initial cost). however, if P is the selling price of the machine that is currently possessed, then P = $105,000. Therefore, the amount that should be used as P for the machine that is currently owned will be the machine's current market worth, which is $105,000. Hence option"a"is the correct option.

Business

Economics

A milling machine with enhanced CNC controls that allow for high-speed machining of free-form parts was purchased 2 years ago for $195,000. The company wants to purchase a recently available faster model with control up to 8 axes for $240,000. The presently owned machine can be sold today for $105,000. Its operating cost over the past 2 years has been $30,000 per year. The value that should be used as P for the presently owned machine is: (choose one) a. $105,000 Ob. $240,000 О с. $30,000 O d. $195,000

A milling machine with enhanced CNC controls that allow for high-speed machining of free-form parts was purchased 2 years ago for $195,000. The company wants to purchase a recently available faster model with control up to 8 axes for $240,000. The presently owned machine can be sold today for $105,000. Its operating cost over the past 2 years has been $30,000 per year. The value that should be used as P for the presently owned machine is: (choose one) a. $105,000 Ob. $240,000 О с. $30,000 O d. $195,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The first cost of an electric rebar bender is P346,000 and a salvage value of P47,000 at the end of its life for 5 years. Money is worth 5.9% annually. If there is no salvage value and the annual maintenance cost is P15,000, find the annual cost of perpetual service.
4
Raytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $800,000, $350,000 of which is borrowed at 11% for 5 years, and will have a salvage value of $150,000 after 8 years. Its use will create an opportunity to increase sales by $650,000 per year and will have operating expenses of $250,000 per year. Corporate income taxes are 40%. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR, if the chamber is kept for 8 years. After-tax MARR is 10%. Use 7 years class depreciation for MARCS
A delivery car had a first cost of $34,000, an annual operating cost of $15,000, and an estimated $5000 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 4 years and must be sold now as a used vehicle. At an interest rate of 12% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle? The market value of the used vehicle is determined to be $ 26423
Please correct Solution with Explanation and do not give image format
complete solution, thank you
Please answer as quickly as possible and zoom in for better view
Use annual worth
A textile processing company is evaluating whether it should retain the current bleaching process that uses chlorine dioxide or replace it with a proprietary oxypure process. The relevant information for each process is shown. Use an interest rate of 15% per year to perform the replacement study. Additionally, write the PMT functions that display the information necessary to make the decision. Process Current Oxypure Original cost 6 years ago, $ 450,000 — Investment cost now, $ — 600,000 Current market value, $ 25,000 — Annual operating cost, $/year 190,000 70,000 Remaining life, years 3 10 Salvage value, $ 0 50,000
Evaluate to total present worth of all the cash-flow of machine ABC for an interest rate of 10% per year. Relevant costs are as follows investment cost = $18,000 useful life = 20 years Market value = $5000 Annual operating expenses =$250 Overhead cost end of the 7th year = $500 Overhead cost end of the 14th year = $800
the first cost of an electric rebar bender is P306,000 and a salvage value of P40,000 at the end of its life for 4 years. money is worth 5.6% annually. if there is no salvage value and the annual maintenance cost is P18,000 find the annual cost of perpetual service.
Matchim's Paving is investing in a new wider paving machine that will cost $131000, which is expected to return $22500 per year of the next 12 years. At the end of the 12 years the paving machine is expected to have a salvage value of $20000. Assuming the cash flow is at the end of the year, what is the Pay Back Period, in years, for the project?